Opportunities for Greater Cost Effectiveness in Public Law 480, Title I Food Purchases

NSIAD-84-69: Published: Apr 19, 1984. Publicly Released: Apr 19, 1984.

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GAO discussed opportunities to improve the effectiveness of subsidized food purchases by recipient, developing countries under the Public Law 480, title I program.

Under the program, the Department of Agriculture's (USDA) Foreign Agricultural Service in fiscal year (FY) 1982 financed about $722 million worth of purchases of agricultural commodities by developing countries. GAO examined 54 of the 86 purchases made in FY 1982 and found that opportunities exist to better control or reduce program costs. In 26 percent of the cases GAO reviewed, buyer purchasing practices were not conducive to achieving the full benefits of open competitive tendering or obtaining the lowest prices. Delays in signing title I agreements and overlapping of purchases with the title II program caused prices to rise. GAO found that the Foreign Agricultural Service is financing price premiums for individualized and nonstandard specifications when lower cost alternatives are available. GAO noted that the legal requirement that the United States receive a fair share of the increase in recipients' commercial imports over time is not monitored or emphasized. Finally, GAO concluded that: (1) the credibility of the price evaluation system is questionable; (2) the Foreign Agricultural Service price reviewers routinely approved sales prices that exceeded the market price as determined by the Stabilization and Conservation Service; and (3) the Stabilization and Conservation Service needs to survey a broader cross-section of the industry to better establish market prices for certain commodities.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: USDA reported that it is working to strengthen the price-gathering functions of the Kansas City Commodity Office.

    Recommendation: The Secretary of Agriculture should direct the Administrator, Agricultural Stabilization and Conservation Service, to strengthen the export market price-gathering function of the Kansas City Commodity Office for wheat flour and spring wheat.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: USDA reported that it is monitoring imports of countries more closely and reemphasizing UMR/fair share provisions during title I negotiations. It also cited two countries where U.S. exports increased mainly due to availability of credit guarantees and blended credits.

    Recommendation: The Secretary of Agriculture should direct the Administrator, Foreign Agricultural Service, to more carefully monitor import statistics and emphasize the legislative requirements to take reasonable precautions to safeguard the usual U.S. markets and to take steps to ensure the United States a fair share of any increase in commercial purchases in countries which have rising imports.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: USDA provided documents on its new procedures requiring justifications for premium specifications.

    Recommendation: The Secretary of Agriculture should direct the Administrator, Foreign Agricultural Service, to require that recipients finance any additional premiums for individualized or nonstandard specifications unless a definite need has been established and justified.

    Agency Affected: Department of Agriculture

  4. Status: Closed - Implemented

    Comments: Documents obtained from USDA indicate that, in FY 1984, it: (1) spread procurements out better; (2) established and adhered to minimum bid and shipping leadtimes; (3) clarified procedures requiring awards to lowest bidders; and (4) eliminated most of the overlap of title I and title II procurements.

    Recommendation: The Secretary of Agriculture should direct the Administrator, Foreign Agricultural Service, to: (1) work for earlier signings of title I annual agreements and a wider spread of procurements over the year; (2) establish a required minimum amount of time between the issuance of invitations for bids and bid openings and the first delivery dates; (3) reemphasize the requirement of the title I regulations that buyers select the lowest responsive bids and that the Foreign Agricultural Service require and document the justification for any exceptions; and (4) eliminate close or overlapping title I and title II, P.L. 480 purchases.

    Agency Affected: Department of Agriculture

  5. Status: Closed - Implemented

    Comments: USDA reported that it is continuing its efforts to expand its information sources, especially for rice prices, to document more clearly the specific basis for price approvals, and expects to rely more heavily on the Kansas City Office's price-gathering functions once they are strengthened.

    Recommendation: The Secretary of Agriculture should direct the Administrator, Foreign Agricultural Service, to: (1) disapprove any title I bid price that exceeds the export market price as determined by the Stabilization Service for the comparable commodity specification and shipping mode; and (2) develop a system for evaluating title I rice prices that uses the broadest practical range of information sources.

    Agency Affected: Department of Agriculture

 

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